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Long-term care coverage pitfalls (conc.)

This is the last in a short series of posts about long-term care insurance. The insurance is supposed to cover the costs of home care or a nursing facility when the policyholder becomes disabled. Many insurance companies underestimated their costs when they introduced the coverage, and they've pulled out of the market. Meanwhile, policyholders are getting frustrated when claims are denied or delayed, or when they realize the terms of their policy aren't quite what they thought. A recent article highlighted some of the issues and posed some thoughtful responses to common questions.

Insurance companies have a few fairly predictable ways to keep premiums affordable. The most obvious of those is to put a cap on benefits -- the insurance will pay up to $1 million during the policyholder's lifetime, for example. Another option is to reduce what services will be covered -- so having your teeth cleaned may be covered, but that crown won't be. There are deductibles, too -- you pay for the first $1,000 of prescriptions, then your insurance kicks in. As most people know, there are a million of them.

Long-term care insurance is known for one in particular: the waiting, or "elimination," period. Many policies will not cover up to the first 100 days of assisted living or nursing home care. Some have exceptions for home-based care. Insurers differ on the definition of the "day," as well. There are "calendar days," and there are "service days." While calendar days are self-explanatory, the service day approach is not. Service days have two criteria that must be met: First, the policyholder must be footing his own bill for the care; and second, the policyholder must be using licensed caregivers.

The upshot of the service day calculation is that the days when policyholders are cared for by family members or friends will not count. There's no way for a family to avoid the cost of the 100-day "bridge."

It all goes back to the basics: Read the policy before you need the coverage. Knowing what's covered and what's not will help you and your family plan for contingencies.

Source: Wall Street Journal, "The Latest Long-Term-Care Snafu," Anne Tergeson, 01/22/11

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